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Sunday, February 05, 2006

Fishing For A Tenant For The Pyramid

Perhaps Bass Pro megastores are the downtown aquariums of this decade.

Once again, cities can’t seem to stop the unrelenting chase for a magic bullet, a quick fix, a simple solution to revitalizing downtowns. It was the attitude that gave birth to a handful of successful aquariums which in turn inspired dozens of other aquariums long after it was clear that the track record of aquariums was spotty and the market was long since saturated.

Now, downtowns like ours now bait the hook for the latest in economic development – fishing megastores like Pro Bass Shops and Cabela’s, the #1 and #2 hottest stores in a retailing sector whose sales exceeds $75 billion a year.

Of course, here, the chase for the latest in downtown redevelopment has special irony. That’s because it’s this decade’s answer to dealing with the last decade’s answer, The Pyramid.

Of course, we’ve suggested that the best course of action would be to level The Pyramid and use the land as new festival grounds stretching from the visitor’s center to Auction Street.

Instead, we chase a future as a pilgrimage site for the bass fishermen among us, joining cities like Buffalo, New York; Broken Arrow, Oklahoma; and Buda, Texas, which are giving away millions in public money to consummate deals to bring megastores to their cities. Here, negotiations for Pro Bass Shop to become the headliner tenant for The Pyramid have entered a pivotal stage, and based on the company’s attitude in Buffalo, it may require a significant investment in public money to close the deal.

In Buffalo, the “incentives package” for Bass Pro Shop is estimated to cost government about $70 million. Faced with a sweeping urban redevelopment plan for the Buffalo Inner and Outer Harbor, city and state officials turned to the bass shop as the centerpiece for its big plans.

The financing package in Buffalo even included one of those notorious hard earmarks targeted for extinction as part of the ethics reform campaign in Washinton, D.C. -- $34 million in federal funds to pay for projects that will “enhance” the Pro Bass megastore.

The Buffalo plans may sound familiar. The city had a large, abandoned building on its waterfront – the Memorial Auditorium – and it had grand plans for it reuse to anchor a key part of downtown redevelopment. Of course, there were promises of tens of millions of dollars in economic impact, thousands of new jobs, hundreds of thousands of tourists and, well, you get the all too familiar picture.

To give you an idea of how out of control the political rhetoric became, New York Governor George Pataki not only delivered up about $20 million in state funding for the Buffalo project, but called it a key accomplishment of his administration.

Pro Bass Shop has said it is investing $66 million in the Buffalo project, whose 250,000 square feet makes it the third largest megastore in the chain. It’s unclear how much space the retailer plans to use in The Pyramid, but there is roughly 350,000 square feet on the main floor, the two levels on the north and south sides of the building and 10,000 square feet at the apex.

Not to be outdone, Cabela’s is demanding government concessions before it agrees to build its megastores. For a 185,000 square foot store between Austin and San Antonio, the company negotiated $40 million in bonds from tiny Buda, Texas, whose annual budget is $4.5 million. As Cabela’s has done in other cities, it then bought the debt in exchange for a sales tax exemption. Meanwhile, the chain got a $600,000 enterprise grant and about $20 million in highway improvements from Texas state government.

The fishing retailers say each megastore attracts millions of visitors, and Cabela's claims the Buda store is a magnet for four million customers. Opponents assail the incentives as corporate welfare gone amok and question why government is a willing partners with a retail company. A Cabela’s official – in a moment of candor – said that the company does best in wringing concessions out of smaller cities because they are anxious for answers for their economic growth.

Lured with the prospects of a signature building in the heart of hunting and fishing territory, expectations are that Pro Bass Shop will to come to The Pyramid. Hopefully, Memphis isn’t the one being reeled in.

9 comments:

I have to disagree Larry.Honestly, what could have possessed them to lunge after Bass Pro Shops? There have been a few comparisons of the Pyramid to the Gateway Arch and the Seattle Space Needle. While I would say that the Pyramid is hardly as iconic as the Arch, it does contain the potential to serve a greater purpose than the Needle. All that to say, the question "Would other cities consider selling there icons for retail development?" does have validity. Whatever its architectural value and controversial history, it does play an important role in the image of Memphis. So, are we willing to let what is possibly the most visually significant structure in our city hoist a giant fish up its side? On the economic side, if these mega-stores are so lucrative for Bass Pro Shop, why are any incentives needed to insure there construction? It can be assumed that major retailers have a thorough knowledge of both market indicators and economic demographics. If Memphis was well suited for such a mega-store, why has Bass Pro not previously sought to either expand their current location or build an entirely new facility? Sure the store would be a draw for a given radius, but that is nothing new. Memphis is already the retail and trade center for a radius of one to two hundred miles in every direction. Of course this drawing power would only exist as long as new mega-stores were not constructed in those markets currently drawn to Memphis. A mega store already exists in Brandon, MS (suburban Jackson), Nashville, and Branson, MO. There has been much controversy concerning the public incentives intended to attract a mega store to Little Rock (enough so to inspire an anti-Bass Pro billboard on I-40 in that city). What is to prevent Jackson, TN, Tupelo, MS, or Oxford/Batesville, MS from attracting their own mega-outlet should the impulse arise? Unless Bass Pro can come up with a method of devoting a significant portion of the Pyramid to other uses, even those that might work in conjunction with the outlet, then I would rank this proposal right there with converting it to a federal courthouse, and only slightly better than selling the site for a Super Wal-Mart

You're comparing apples and oranges. The St. Louis Arch and Seattle Space Needle aren't functional buildings (except for a ride and restaurant) and couldn't be converted.

If the city of New York owned the Empire State building, would you oppose renting it out or selling it to commercial interests?

At this point, we don't know if Memphis will sell it or lease it. Either way, convenants could be put in about the appearance so that a large fish isn't put at the apex of the Pyramid.

Why are economic incentives used to lure any business? If there is a fair balance of interests, then use them.

The Pyramid isn't ready to occupied by a retailer. BTW, often large retailers lease buildings rather than own them. That way, they're not stuck with the buidling should they move. In commercial real estate, the owner of the building typically pays for remodelling before the bldg is leased. Soooo, if the city leases the bldg, will it renovate the bldg? How much will that cost?

If leased, how much will the lease be? How much do we expect in sales tax revenue?

There are a lot of questions and I'm sure that is what all the negotiating is about. As we found out with the Forum, the Devil is in the details.

turnerarch, For all of our sakes, please don't condense your posts. They are always provocative, thoughtful and helpful, as was this exchange between you and Larry.

I guess part of our problem is that we just don't feel that The Pyramid has enough architectural integrity and quality that it deserves such lengths to keep it open. But ultimately, the public policy value will be seen in the city government's ability to negotiate a deal that serves the public's interests as strongly as the retailer's. Just be wary of any economic impact studies that indicate that it's a windfall for Memphis.

Is it true, that the city has to use all the incentives available to attract any business to relocate to this city? This city is known for some of the less-favorable things, such as high crime, poor performing schools, high taxes, poor quality of life, etc., etc. Who in their right minds, would come to a city with these undesirable qualities, unless you gave them your arms and legs---and promised the other body parts in the near future.

"Festival grounds?" Please. That's a real tax revenue and redevelopment engine if ever there was one.

It's important for the public to make sure the City doesn't give away the store and I hope that will happen. But I think this is a great repurposing. It will certainly bring a whole new crowd to the downtown, one that likely had little reason or need to go before.

And I suspect that's part of the problem for some with this idea. It doesn't fit in with the "high art, high concept" approach to a revitalised downtown. I can't imagine that a lot of the Bass / Cabela crowd will want to go to the Cannon Performing Arts Center, the gallery tours, the cutting edge fusion restaurants, Ann Taylor's Closet or the kicky trinkets stores.

Hunters and outdoorsmen are overwhelmingly working class family folk. The downtown is pegging its future on the high education / high income young singles and empty nesters. There will be an inevitable clash of cultures. I think some Downtowners fear waking up to a Barnhill's Buffet opening on the Mall. ;-)

When the City foolishly committed to the Forum, they instantly relegated the Pyramid to white elephant limbo. It's been clear from Day One that its debt would have to be paid by the City to get anyone to try redeveloping it. Even a "festival ground" will force the City to eat the Pyramid debt. At least this way some tax revenue will accrue to the City, unless the downtown public commissions eat it up through diversions. Which wouldn't suprise me at all.

How does SMC reconcile opposing re-using the Pyramid on aesthetic grounds with supporting remaking the Promenade with skyscrapers? Only a fraction of the land will remain fully public and most will be handed over to private developers. My tax argument above also applies. Hmm?

Mike: You've been reading too much of the misleading information put out by the Friends of the Riverfront. There aren't any plans for any skyscrapers on the riverfront and never have been, except on the drawings put together by people with a specific axe to grind. As for the festival grounds, Tom Lee Park is torn up for about half the year because of Memphis in May, and Memphis has one of the lowest greenspace ratios in the country, so let's get Tom Lee back to full public use without the yearly resodding and waiting for the recovery from the damage to it, and add some greenspace to the riverfront. Put simply, The Pyramid is an inferior building built on the cheap and it shows.

As to anonymous' point about PILOTs, other cities have the same trend lines and problems that we have, but they don't give away taxes to get businesses to locate there. We need to quit thinking that somehow we are so unique and different - too much crime, bad school system, too much poverty, two governments, etc. - that we have to give away our taxes.

Until we demonstrate that we are a quality community and deserve quality economic development, we'll continue to have to pay people to bring their companies here. And we don't have to do it.

Oh, by the way, Mike, the RDC plan actually has a net increase in greenspace, not less land. Again, the Friends of the Riverfront (which includes a number of our friends) hasn't shot straight with this information either.